Stranded 401k’s across 4 companies

[bluefrog76]

Howdy everyone. I’ve got 4 401ks across 4 companies because I’m dumb. Whats the best option for the three that I’ve left behind? It would be 5 with 4 left behind but one automatically converted to an Ira. The IRA is with one of the 401k providers that I have a 401k at still, interestingly enough. So 4 providers, one of them active, one of them with a 401k and a small ira.

What should I do? I’m apparently passed the period where I can roll them over from company to company with no penalties. Should I dump them slowly into IRAs? I take the standard deduction every year because I just don’t do enough tax deductible stuff. I like life simple.

Thanks if anyone can help.

 

[habdain]

@bluefrog76

I’m apparently passed the period where I can roll them over from company to company with no penalties.

This isn't a thing, you can rollover anytime you want.

I'd roll everything into your current 401k.

 

[bill55]

@habdain OP this is the correct answer.

 

[lynnak]

@bill55 I disagree without more info. My most recent employer has a fairly decent plan in terms of costs and investments, but my other 2 are still better. I somewhat regret not rolling my 401k from employer 1 to employer 2 since employer 2 has the best plan, but employer 1 is still better than employer 3.

If the new company's plan has high costs and or terrible fund choices it would be a bad idea to roll into it, unless the other balances are low (like under 10k), and that's due to the risk of them being forced out to an IRA that OP doesn't choose.

 

[wingsofthedawn]

@lynnak This dude can’t even keep track of where everything is. He is so far away from comparing relative costs. Just making sure it’s not all sitting in cash would be a huge win.

 

[krae991]

@lynnak Why wouldn't you just roll them into an IRA somewhere decent like fidelity or Charles Schwab? Then you have all the selection of funds you want and low fees without some idiot in hr giving you a small selection of funds to choose from

 

[lynnak]

@krae991 Pro-rata rule. Back door Roth conversions are more complicated and cost more in taxes if you have a traditional IRA balance.

 

[krae991]

@lynnak Do you think folks with 4 lingering 401ks are doing back door roth conversions?

 

[hogree]

@krae991 To wit: half of the MFJ lower bound for 2023 Roth IRA contribution phaseout is 109k, which is ~75th percentile for 55yo individual income (where the income-for-age curve peaks).

The only demographic for whom the Roth IRA contribution MAGI limit is less favorable is MFS; the limit is a higher percentile of income for single/HOH and single/imbalanced-income married households, and for any other age.

The vast majority of people can do Roth IRA contributions through the front door.

 

[krae991]

@hogree Right. For some folks, jdmulloy's advice is spot on, but making an effort to clean up finances is better than getting stuck trying to find the perfect strategy.

 

[lynnak]

@krae991 Lingering 401ks or not isn't really the deciding factor. If my wife was working even half time we might be in that territory. I do work in tech in a high cost of living area, so that's a factor. My first company out of college had a really good 401k but the next one didn't have a 401k at all. I regret that I didn't know much about IRAs the year I worked there. I had been burned by opening a traditional IRA at a credit union in a CD at the first job and having it be non deductible. I've since converted it and moved it to Fidelity to invest it.

I do have a personality that is afraid of doing irreversible things. There's so many people who can't do backdoors because they have traditional IRA balances. I'm also biased by the fact that every 401k I've been in has been low cost and defaulted to index TDFs, so keeping money in them is fine. One is at Empower (was originally at Fidelity and then the company moved to Empower), my other 2 are at Fidelity. So it just shows up as two different accounts when imog into Fidelity, not really a problem.

 

[krae991]

@lynnak Yup. We are all scarred by our own experiences. I started a traditional IRA right out of college 15 years ago, long before the 2018 IRS rules. Couldn't take advantage of the mega backdoor Roth my last company offered. But most of my 401ks have been absolute junk with 1-1.5% fees and terrible selections. So I have been happy to roll my 401ks into my IRA.

Again, though...imperfect action is better than inaction. OP should do something I think we both agree.

 

[lynnak]

@krae991 Fair enough. I don't entirely agree on "doing something" being better than not. Everyone is jumping down my throat for saying "it depends" instead of giving one size fits all blanket advice that rollover to an IRA is always the right choice. This is one of those things where making a wrong choice could be very hard to undo later.

If we knew OPs marital status, age, approximate salary/household income and what they have in each account we could give much better advice. OP could be a few years away from needing to do back door Roth, or could be so far away they'll always be able to do Roth through the front door.

Also I'm not sure if anyone's mentioned that EIRSA protection is also an advantage for 401ks that may or may not apply to IRAs. In some cases it's been interpreted that way, but the law isn't explicit federally that IRAs are safe from lawsuits and such.

 

[krae991]

@lynnak I think you and didhe both gave good advice. Given our lack of knowledge of OPs situation it's hard to know what exactly to recommend.

 

[andrew742]

@lynnak Just roll them all into Fidelity. They have plenty of options and it’s cheap. Why do you think some companies plan from an old job is worth hanging onto?

 

[jbeez]

@andrew742 This is what I've done. Multiple 401k's all rolled over to Fidelity IRAs, 1 ROTH, 1 traditional, and 1 401k. I also created a separate investment account and cash account that allows me to play with my funds however I wish and it's all located in a single institution. Well.. was until I moved out of the country.

 

[beautifulkindheart]

@clanofails Why not just roll into an IRA and mimic the portfolios

 

[cns]

@beautifulkindheart Amen

 

[tedstriker76]

@habdain What are the steps necessary to roll into current 401k? Also what does this actually do? Does it sell the holdings of my old 401k and buys the funds in my current 401k?

 

[returntotheway]

@tedstriker76 Varies a little among servicers, just contact your current company 401k and ask for assistance, they're usually happy to help.

Yes it sells current 401k assets, distributed as a cash check, either directly to new 401k (preferred) or to you then you deposit (often via app) to new 401k. If you receive the check you only have 60 days to complete the deposit, so do it ASAP to avoid taxes & penalties. There should be no taxable event for rolling old 401k to new 401k.